A prominent, experienced Bangkok-based real estate professional has shared his perspective on the Bangkok rental market, what developers should be doing now and some advice for Thailand’s property landlords.
Speaking exclusively to ThailandProperty.News, Marciano Birjmohun (pictured below) has provided some fascinating insights and consumer advice from a real estate agent’s viewpoint. He also has some suggestions for Thailand’s property developers.
TP.N asked: How would you describe the Bangkok rental market right now?
As I have mentioned in previous articles, Bangkok needs stimulants to become a buy-to-let environment, and it needs to start with the developers.
Almost every developer has a so-called “rental subsidiary” but in reality, these subsidiaries are not offering stable after-sales services.
The rental market is also being disrupted by the influx of identical product supply within a short-term period.
I believe we can see the Bangkok rental market from two perspectives: new supply (completed after 2012) and old supply (completed before 2012), with the older supply enjoying higher occupancy rates due to lower rental prices compared with the size and location.
New rental supply can be absorbed if the rental rates are attractive for middle-class citizen.
If you look at On Nut and upwards, most of the mid- to high-density projects have occupancy rates of between 85 percent and 100 percent, and this is all to do with the low acquisition prices and forthcoming lower rental rates.
New rental supply in Bangkok’s central business district (CBD) are reaching astronomical rental rates, rates that logically come from the higher sales prices however, these rental rates are now equal to a serviced apartment.
That’s one reason why serviced apartments are doing extremely well in Bangkok. They offer full-service concierge and facility management compared with a new, unfurnished rental property.
My advice to developers is to start focusing on serviced apartments with buy back options.
Your condominium projects do not always fit with the demographic and infrastructure, especially in the heart of the tourist district.
An emerging solution to support a buy-to-let environment will come from technology.
Some listed developers have started to list their rental properties on tech platforms (other than property portals).
These platforms have a wide B2B database which offers full rental commission, and sometimes even a bonus for the real estate agents.
Because the listings are offered and collected by the developer directly, there is a clear-cut deal. Some listings are even taken from the developers own rental subsidiary.
More developers are becoming aware that rental support is a must to sustain their ecosystem.
TP.N: Do landlords understand current market conditions? Are they being realistic with their expectations?
The sentiment among landlords is mixed.cSome landlords are lucky and find a tenant within three months while others wait longer.
Lowering the rental rate is not always the solution. Fellow landlords are direct competition.
I would advise investors in the CBD to start accepting rental yields of between 3 percent and 4 percent.
In the Bangkok city fringe and peripheral areas, the expectation of a five-percent-plus yields can be met due to lower rental rates and growing population.
We know the majority (75 percent) of new supply is being built outside the CBD. Not only is there a growing demand for quality living, expats and middle-class Thais are the main target.
In Samut Prakan, for example, not far from Bearing, the population has doubled within two decades, and it’s expected to be one of the emerging locations in Asia-Pacific according to the United Nations Population Division.
This puts it alongside Bandung, Cebu City, Surabaya and Da Nang.
Developers are already increasing their land banks along the extended Green Line mass-transit system/
Some more advice to landlords is not compare Bangkok to your hometown. The market dynamics are quite different over here. Thailand is a top tourist destinations and business hub, but keep in mind that income inequality is one factor that influences the real estate market.
TP.N: What kind of rental units are drawing the most attention with your agency?
I can only answer this based on empirical data that I collect from developer friends and not from my employer.
Expats with families prefer minimum two-bedrooms within walking distance from the BTS and International schools.
They like older buildings with living spaces starting at minimum of 70 sqm. Serviced apartments are top of enquiries.
We also see a new stream of tenants; those who have the financial means to pay for a luxury lifestyle. Many of these tenants are foreign entrepreneurs and business owners and are spending between THB 100,000 and THB 150,000 per month.
What we see in the Bangkok real estate agent community is clear segmentation in terms of pricing.
It is becoming harder to find an agent who is willing to market THB 12,000 to THB 15,000 per month rentals. The majority of agents do not work for deals of less than THB 30,000 per month. The time an effort required is equal and they rather go for a better pay day.
TP.N: In your view where is the Bangkok property sector heading, and what can developers do to manage their unsold inventory?
So-called ‘clearance sales’ have already started.
I’m seeing many developers who are withholding new launches and focusing on clearing their remaining stock. We see this during the final quarter every year.
We recently had a delegation of property investors from Malaysia who solely focus on foreclosure assets.
They wondered why they were not able to purchase bulk units from completed buildings for the pre-sale, or even bottom prices?
The answer is that developers seem willing to compromise on price?
In Malaysia, property developers will adjust their pricing to clear all unsold units regardless of the market price.
This was just one of many occasions where I turndown well-groomed overseas investors because Thai developers are not willing to compromise on the price of their remaining stock.
A message to Thai developers who read this story. There are investors who are eager to buy your stock.
There is still a point of leverage in overseas markets, and the demand is there.
The best uptake rates are at projects priced between THB 2.5 million and THB 5 million per unit. Everything above that will sell, but at a slower pace equal to the local market.
Thailand property developers need to understand that in today’s competitive world, lead generations is a reflections of marketing expenditures.
Without dedicated marketing budgets they will not reach targets.
I believe they should not be conservative and build their brands.
Take advice from professionals who are on the ground. There is a new generation of movers and shakers in the property and real estate industry.
The Bangkok property sector is slowly also attracting more retirees from Asia-Pacific and Hong Kong.
A fair percentage of Hong Kong sales comes from buyers aged above 55-years-old who are aiming to have a second home or retire in Thailand.
Finally, during 2019 I believe that foreign investors will focus more on low- to mid-density projects rather than the high-density ones were seeing now.